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The Cacophony Of Markets

Tyler Durden's picture




 

Via Mark Grant, author of Out of the Box,

The Rhapsody of the Markets
 
Recently I was on CNBC and Steve Liesman, who I know personally and is a very thoughtful fellow, made the comment that I had called the events right but I had not gotten the market right. It was a fair remark as related to the stock market. My reply was that while I thought that he was correct about the stock market that I thought I had been correct about the bond market which was leading the way and that the stock markets would catch up. Since then I have given our conversation some more thought.
 
In Quantum Mechanics there is what is called the “string theory.” Without a great deal of complicated explanation the concept is that the strings vibrate and the more they vibrate the more they are drawn together. This is a decent analogy for the financial markets. As events get more tense or there are “moments” the markets vibrate more wildly and the equity markets in Europe, Asia and the United States begin to move more in tandem; they are drawn together. The same can be said of the equity and the bond markets; as more excitement of one kind or another occurs the more the debt and equity markets move in the same direction. Conversely when things are calm and the world is peaceful the markets vibrate less and spread apart and move on the basis of their own fundamentals and technicals.
 
Generally, not always but I would say 75% of the time the bond markets leads the stock markets. This is because of the focus of the two markets are different. Bonds are affected by world events immediately as the relative value of bonds are more tied into world markets than the American Stock market. The bond markets are also much more a function of the institutional investor than the retail investor so they react more quickly. Around nine months ago I called for a 10 year Treasury at 1.25% and we are but a scant 34 basis points away from that now. The Treasury market is indicating a worsening financial condition and more risk while the equity markets are dancing along as if they are immune from world events. It often takes awhile but I think the equity markets will catch up in due course.
 
Actually the stock markets are confronted with two major dilemmas that I think will cause their decline. The first is Europe and their “moments.” While everyone waits to see if we have a “Lehman moment” or a huge systemic event we have certainly had “moments.” We have had two “Greek moments,” an “Irish moment,” a “Portuguese moment,” a “Cyprus moment” a “Spanish moment” and now we are about to get a “Slovenia moment.” This would be seven out of the seventeen economies that belong to the European Union that need to be bailed out. This is 41% of the Euro-17 that is in trouble. The second indication of decline is the recessions in Europe. In fact virtually all of Europe is in a recession and while Germany has held its head above the water I think by the third or fourth quarter that she is also mired in an economic decline. Europe is 25% of the global economy and this is beginning to affect the United States as exemplified by the declining revenues and profits of many American corporations that have so far reported out this quarter. The axes of the financial markets are America, Europe and China and with Europe in serious decline and China also contracting the strings are vibrating so that all of the markets are likely to go down.
 
I would also like to point out the difference between the American financial crisis and the European one. We had a long time line of easy money and normalized mortgage and mortgage securitization prices. Then we hit the wall with Bear Stearns and Lehman and the dam burst. This was, in part, because no one was expecting it and very few, initially, understood the implications of these two events. The European crisis has also had a long time line to date. We have had many of these “moments” but ones that were somewhat expected and so the surprise/fear factor has not been heightened yet and so the strings quiver and then calm down but nothing yet has sent them into financial shock. The “Greece (3) moment” has the potential to do so if the Troika reports out the expected disaster and then debt forgiveness is not politically possible and the IMF/EU refuses funding and the country defaults. The total amount of debt is $1.3 trillion and if Europe believes its own nonsense and Greece does default then you may expect a “systemic moment.”
 
Even without some cataclysmic shock, realization is coming. The debts of Europe are being paid off with ever more debt and the can kicking will find its walls and as the European recession deepens it will be felt in America and then adjustments will have to be made. I do not make the call for a trade but declining financials are coming; both for corporations and for our GDP and eventually the equity markets will notice. One may also expect the Euro to decline against the Dollar and 1.18 will be the next level I think. Since Oil trades in Dollars the Europeans have had an advantage as they can buy cheaper Oil than America but as the Euro recedes against the Dollar it will also fuel their recessionary decline.
 
Fact versus Fantasy
 
The EFSF Stabilization Fund is in existence, has no seniority, and after the bailout for Spain, which will go directly to the sovereign and not to the banks, will have about $250 billion left and is the only so called “Firewall” currently in existence.
 
The ESM, the other stabilization fund, is not in existence, is being challenged by Finland, the Netherlands and in the German courts and, while likely to come into existence, is not yet.
 
The ECB has said they have lowered their collateral standards while the Bundesbank has refused to do so. The German Central Bank then effectively overruled the ECB as they control the Target2 funding and have blocked the ECB by fiat.
 
The newly proposed European Banking Regulatory Authority is not yet in existence and will not be for between six months to a year; if ever.
 
The Germans will not “harmonize” European debt until this authority is in existence so that the plan is not in existence and will not be, in the best case scenario, for quite some time.
 
The proposed European Banking Authority would require every nation in Europe to relinquish control of their budgets and their finances to a central European authority. Not only is this politically problematical but it is constitutionally problematical in many nations including Germany. In the end, in my opinion, there will be no central regulatory body, it will not happen, so that the EU has proposed a scheme that will never be actualized as we continue to sit on square one.
 
There is no plan, scheme, artifice that will allow for Greece to pay off its debts. It has to be “debt forgiveness;” which has been discussed by no one or default. The odds of default are now greater than 95% which will most likely take place within the European Union and which will come after the Troika report and then when the IMF/EU refuses more aid. Greece defaults, receives some kind of debtor-in-possession financing and is forced back to the Drachma and devalues. The Prime Minister and the Finance Minister calls it a “great victory for Europe” and we get proof, once again, as first demonstrated by Spain, that there are, in fact, parallel universes. The scientific proof of parallel universes then may be the highlight of the accomplishments of the European Union for the year.
 
“Some may call the nations on the continent Europe. These nations, however, have engaged in so many fantastic notions recently that I prefer to name the Union in Europe; Middle Earth.”
 
                                             -The Wizard

 

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Thu, 07/05/2012 - 13:49 | 2589561 Occams Aftershave
Occams Aftershave's picture

So, what's the trade?

Thu, 07/05/2012 - 13:57 | 2589589 slaughterer
slaughterer's picture

The trade is: start shorting the SPX at 1378.19 pivot.

Thu, 07/05/2012 - 14:16 | 2589643 Bullionaire
Bullionaire's picture

"...Steve Liesman, who I know personally and is a very thoughtful fellow..."

 

Stopped reading right there.  Seriously?

 

 


Thu, 07/05/2012 - 14:22 | 2589666 AndrewJackson
AndrewJackson's picture

come on zero hedge. How did the summer intern miss this one. Any person quoting steve liesman in a positive light really is backwards.

Thu, 07/05/2012 - 15:14 | 2589849 azzhatter
azzhatter's picture

Steve LIESman who is a pindick government shill is an ignorant fuck and a pussy who just pumps the government line like a good little comrade, is more accurate.

Thu, 07/05/2012 - 14:20 | 2589658 jus_lite_reading
jus_lite_reading's picture

The trade is: BUY GOLD AND SILVER

I think the time has come for my fellow ZHer's to become aware of the most evil corporation in the world: MONSATAN. Tyler has mentioned the Frankenseeds and their evil practives before but this have gone too far.

They managed to get an entire thread on Yahoo pulled because the thread linked information about which politicians are getting paid to secretly pass bills and give MonSatan certain "benefits." The thread was removed by the evil filth because they don't want the truth to come out... but OH how the tables will turn!

The deleted thread included some other great information about how MonSatan has been removing the reproductive powers from plants so farmers are forced to by every year new seeds!!

Now the plot thickens...

http://articles.mercola.com/sites/articles/archive/2012/07/05/monsanto-roundup-effects-on-honeybees.aspx?e_cid=20120705_DNL_artNew_1

"An Illinois beekeeper whose bee hives were stolen and allegedly destroyed by the Illinois Department of Agriculture has stirred up a hornet's nest with his questions on why the state did this, and most importantly, what they did with his bees.


The state claims the bees were destroyed because they were infected with a disease called foulbrood.

But when the 58-year apiary keeper had his hearing—three weeks after the removal of his bees without his knowledge—the state's "evidence" had disappeared, leaving more questions than answers about the raid on the beekeeper's hives.

Some people, including the beekeeper, Terrence Ingram, suspect the raid has more to do with Ingram's 15 years of research on Monsanto's Roundup and his documented evidence that Roundup kills bees, than it does about any concerns about his hives.

Interestingly, the state's theft targeted the queen bee and hive he'd been using to conduct the research."

 

YOU CAN'T MAKE THIS SHIT UP!!!

 

 

Thu, 07/05/2012 - 15:01 | 2589797 walküre
walküre's picture

Unbelievable. Satanic for sure.

MonSatan is represented heavily in the red and the blue team.

What can we do?

Thu, 07/05/2012 - 14:25 | 2589680 J 457
J 457's picture

Might go a bit higher than 1,378, probably near 1,400 by mid August before the trap door opens. 

Thu, 07/05/2012 - 13:51 | 2589565 kato
kato's picture

should read: "... Steve Liesman, who I know personally and is a very thoughtful, dumb fellow,..."

Thu, 07/05/2012 - 13:52 | 2589568 reader2010
reader2010's picture

Economists are the pianists working in brothels so to speak.

Thu, 07/05/2012 - 13:53 | 2589577 GMadScientist
GMadScientist's picture

The economists are working penises in the brothels, so to speak.

Thu, 07/05/2012 - 16:14 | 2590075 THX 1178
THX 1178's picture

The common man is the asshole, assuming it's a gay brothel.

Thu, 07/05/2012 - 13:51 | 2589569 GeneMarchbanks
GeneMarchbanks's picture

Recently I was on CNBC and Steve Liesman, who I know personally and is a very thoughtful fellow

Tried to regroup from this one and read the rest. I'll try again later, maybe.

Thu, 07/05/2012 - 14:17 | 2589645 Jack Sheet
Jack Sheet's picture

Fucking name dropper, this one

Thu, 07/05/2012 - 13:53 | 2589574 GMadScientist
GMadScientist's picture

Honey Badger Market Don't Care. Honey Badger Market Don't Give a Shit.

Thu, 07/05/2012 - 13:53 | 2589575 fuu
fuu's picture

"Recently I was on CNBC and Steve Liesman, who I know personally and is a very thoughtful fellow,"

Stopped reading right there.

Thu, 07/05/2012 - 13:54 | 2589581 GMadScientist
GMadScientist's picture

And what putrid thoughts to be full of, indeed.

Thu, 07/05/2012 - 13:58 | 2589584 DavidPierre
DavidPierre's picture

911 BANK HEIST

As the years pass, the evidence mounts. The  www.ae911truth.org/  organization is expert and loud, the architects and engineers who provide expert testimony on the absurd official 911 story at the World be-Trade Tower.

A secretive Russian Bond valued at $240 billion was to mature the very next day, most of which were held in the Cantor Fitzgerald offices atop the tower. Those bonds could not be redeemed at maturity, a theft.

Nothing on the official story makes any sense, nor does it stand up to chemical scrutiny or to scrutiny from phsyics.

Costa Rica has a richly dotted landscape of very well informed people with all kinds of legitimate contacts, such from Secret Service friends, bank executive friends, ex-USMilitary types, slush fund managers, obscure types, and more.

My informed sources have been numerous that have shed light on the infamous event.

It was a grand bank heist that involved around $100 billion in stolen bearer bonds,  around $100 billion in stolen gold bullion bars, and around $100 billion in stolen diamonds.

The 911 event marked a coup d'etat of the United States Govt.

Their grip on power continues through to today. The true story will come out, all in time, like veracity bubbles working toward the surface. Those holding the lid on the actual events are reducing in number each year. My expectation is that the true story will come out as the inevitability of a USGovt debt default becomes evident and unavoidable, when the JPMorgan machinery fails in full view to uphold the USTBond tower. At that time, the new trade settlement systems, the new barter systems, the bypass to USDollar settlement, they will come into place.

Gold will be at the center of every new system. Much like how geophysics leads to iron forming at the core of a stable body, gold will form at the core of the stable financial body. But its price will be closer to $10,000 per ounce than $2000 per ounce.

Gold price charts mean little, when the enter paper system is in the process of imploding, first bonds, then currencies, then sham gold markets.

http://news.goldseek.com/GoldenJackass/1341518400.php

Thu, 07/05/2012 - 14:07 | 2589618 GMadScientist
GMadScientist's picture

"obscure types, and more."

They're coming for you. Run!

Lulz-tronic'

Thu, 07/05/2012 - 14:31 | 2589697 pods
pods's picture

Not really following how bankers would want gold to be at the center of anything.

If any type of currency would be redeemable in gold, you would see outflows of the metal to the nth degree.

Wont, cant, and will not ever happen in the fractional reserve banking nightmare we are in.

As to the bonds and diamonds, I would not see how this would be worth it.

Diamonds are pretty worthless for their rarity, if we were to break the De Beers cartel.  You can even make fabulous ones now for a fraction of retail.  

I would say money was involved, as there was that little nugget of $2 TRILLION USD that spilled out from the pentagram's budget over the years.

Sounds like the brunt of your story is disinfo to be honest.

Why not name drop Leo Wanta while you are at it?

pods

Thu, 07/05/2012 - 13:56 | 2589585 orangegeek
orangegeek's picture

This is a process, not an event.  The markets keep trying to push higher only to fall dramatically. 

This is what was said in April.

http://bullandbearmash.com/chart/sp500-daily-april-5-2012/

Thu, 07/05/2012 - 13:57 | 2589591 Spitzer
Spitzer's picture

recession is needed to correct the imbalances and that is what Europe is doing

Thu, 07/05/2012 - 13:58 | 2589595 Dr. Engali
Dr. Engali's picture

 

"Steve Liesman, who I know personally and is a very thoughtful fellow"

 

One comment killed the whole post for me.

Thu, 07/05/2012 - 14:11 | 2589628 the not so migh...
the not so mighty maximiza's picture

Yeah I know right.

Thu, 07/05/2012 - 14:07 | 2589600 falak pema
falak pema's picture

the cacophony of pots and kettles, all pierced, all pissed off at losing their precious contents.  

Who is the blackest of them all?

Lol, ask the fire on which they sit. As if a fire chooses its victims, its all consuming. And its not limited to EU money.

Thu, 07/05/2012 - 14:01 | 2589603 midgetrannyporn
midgetrannyporn's picture

This guy can't be worth a crap if he is sucking up to Liesman.

Thu, 07/05/2012 - 14:02 | 2589606 t_kAyk
t_kAyk's picture

"The debts of Europe are being paid off with ever more debt..."

And...

"There is no plan, scheme, artifice that will allow for Greece to pay off its debts."

That is the point, Mark.  There is no end-game for this that involves the debt being paid off.  It is designed to be forever climbing, further endenturing every man, woman and child on the planet.  None of this, anywhere, will be paid off, ever. 

Thu, 07/05/2012 - 14:04 | 2589613 modest_proposal
modest_proposal's picture

With all due respect... leave the physics to CERN. In string theory, higher energy and excitement does NOT lead to higher correlation or cohesiveness.

But on the markets... My money's already in your corner. It's pretty beat up right now, but the market levitation is going to come to an end at some point.

Revised physics lesson: There Ain't No Such Thing As A Free Lunch (TANSTAAFL). Second Law of Thermodynamics, bitchez

Thu, 07/05/2012 - 14:06 | 2589615 rsnoble
rsnoble's picture

Oh look.......they are preaching "generational buying opportunities" again today. Right when we are approaching a major trendline of resistance thanks to a no volume holiday week. Maybe they mean after the next selloff?

Thu, 07/05/2012 - 14:11 | 2589627 AccreditedEYE
AccreditedEYE's picture

We are much more financially prudent in Middle Earth than your continent of Europe.. and precious metals are our currencies. Your comparison is baseless. Find a new one.

Thu, 07/05/2012 - 14:13 | 2589635 SmoothCoolSmoke
SmoothCoolSmoke's picture

Slide to 1170 starts Monday.  Good NFL shelves QE.  Bad earnings kill stocks and commodities (oil). Stocks/oil sink right up to Jack-ass-son Hole.  Buck Fernankie revies QE.   Stocks rise until Novemer.  Obama re-elected. 

Thu, 07/05/2012 - 14:27 | 2589686 J 457
J 457's picture

Why?  What is catalyst?  Just pure guess work on your part..

Fri, 07/06/2012 - 06:21 | 2591133 MSimon
MSimon's picture

Platinum

Thu, 07/05/2012 - 14:15 | 2589640 Jack Sheet
Jack Sheet's picture

Is Mark Grant a pseudonym for Graham Summers?

Thu, 07/05/2012 - 14:46 | 2589748 GeneMarchbanks
GeneMarchbanks's picture

No, this is just what happens when markets are too free: the ones with the most cash get to have their opinions published while sanity stays shelved.

Shame.

Thu, 07/05/2012 - 14:26 | 2589682 No Euros please...
No Euros please we're British's picture

But surely, the EU have invented the Higgs boson which solves everything?

Maybe I need to read up on the big bang theory?

Thu, 07/05/2012 - 14:32 | 2589699 Few
Few's picture

Out of 192 nations listed the USA is dead last. https://www.cia.gov/library/publications/the-world-factbook/rankorder/21...

 

What can I say except it sucks to be us. It couldn't be cronyism could it? That vampire squid or whatever? We can point fingers all day long to be sure, still, I think we dropped the ball.

We got sucked in to that American dream bullshit and were asleep to believe it. I bought into it for a long time. I'm awake now and nobody is coming to save me. It's all on me now,

fuck these parasites.

Thu, 07/05/2012 - 14:42 | 2589729 Village Smithy
Village Smithy's picture

In the beginning Bernanke thought that if he dared just "tweak" the markets a little he could at least keep a very important sentiment indicator working for him. Now even he must be very disturbed (as in scared shitless) by the Frankenmarket he has created.

Thu, 07/05/2012 - 14:47 | 2589750 nolla
nolla's picture

"seven out of the seventeen economies that belong to the European Union that need to be bailed out. This is 41% of the Euro-17 that is in trouble."

 

Tyler's, for god's sake, stop quoting this clown anymore!

 

Are Greece, Ireland, Cyprus... equal to Germany, Dutch... counting peanuts to apples.

 

A few weeks ago this clown said something like "Europeans are utilizing their currency since they pay 25% less for oil than U.S.". Where did he get the 25% discount that Euro area has? From the EUR/USD cross rate that was 1.25 then. Now it's under 1.24, so maybe the "advantage" is diminishing now... yes?

Thu, 07/05/2012 - 14:51 | 2589769 Jack Sheet
Jack Sheet's picture

Recently I was on CNBC and Maria Barfaroma said she wanted to blow me after the interview.

Thu, 07/05/2012 - 15:04 | 2589807 GeneMarchbanks
GeneMarchbanks's picture

And then what happened?

Thu, 07/05/2012 - 15:15 | 2589855 Jack Sheet
Jack Sheet's picture

stagflation...

Thu, 07/05/2012 - 15:02 | 2589800 Quinvarius
Quinvarius's picture

The only thing the bond market is saying is that Ben and his pals are printing money and buying bonds.  The market is stupid.  It can not possibly forecast anything in a controlled economy like this pile of fucking shit the global central bankers and governments have created.  America becomes it's enemies.  We went full on Fascist after WW2 with our military industrial complex.  Now we are going full on Soviet central planner.  I can't wait for us to go all Taliban economy.  It should be a real hoot.  I never liked watching Soccer anyway.

Thu, 07/05/2012 - 16:48 | 2590153 ZeroAvatar
ZeroAvatar's picture

I can't wait for us to go all Taliban economy.

 

Maybe not so bad.   Parts for your AK at the local flea market.  Kewl!

Thu, 07/05/2012 - 18:27 | 2589845 rufusbird
rufusbird's picture

Some things are better left unsaid.

Thu, 07/05/2012 - 15:34 | 2589920 Bastiat009
Bastiat009's picture

"This is 41% of the Euro-17" ... in other words, Cyprus = Germany = Spain ... that is CNBC's logic and very disappointing here.

Thu, 07/05/2012 - 15:39 | 2589933 fuu
fuu's picture

I actually had to go look but sure enough it's down today.

Thu, 07/05/2012 - 15:54 | 2590002 Silversem
Silversem's picture

You can not trust financial markets these days. Just gold! I like to trade the yellow stuff.

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